Branch became a victim of the subprime mortgage market after refinancing her home last year, she said. Subprime mortgages target the elderly and those with poor credit with promises of low payments -- but they are high-interest mortgages and have come under critical scrutiny nationally.
Branch had been trying to refinance a reverse mortgage, which was taking too much equity from her home, her son Nate said. She was told the subprime loan would allow her to pay less monthly at lower interest rates, but the lender did not inform her that her rates would jump, she said.
"I don't know what's going to happen," she said. "I'da had some money today if I'da stayed there (with the reverse mortgage)."
A ray of hope emerged this week when an East Bay mortgage lender began helping Branch obtain a second reverse mortgage to replace the subprime one.
"We have approved her. We're one week away from closing," said Ken Corbett, a broker at Seniors Reverse Mortgage.
"It's a total disaster. The current mortgage is accruing $1,000 every five days. They have an $800 a month income, and they were approved for a loan with $4,300 a month payments. That's astronomical for me," he said.
Parishioners at Woodside Village Church, which has worked for years with Branch, have been trying to help save Branch's home. Wayne Larocque, a partner in a venture capital firm, had covered Branch's house mortgage payment for a couple of months, but it soon became apparent that the octogenarian was in an intractable situation.
"Everyone has benefited from her. We have utilized her and her son Nate over the years and got pretty close to her," he said.
He convened a meeting of real estate professionals at the church to brainstorm ways to help Branch get out from under the debt and retain the home. They looked at co-signing on the loan -- a big financial commitment -- and also possibly getting a reverse mortgage, but the prepayment penalty alone would be prohibitive, he said.
Branch is now two months behind in payments, putting her at risk for foreclosure, Corbett said.
He approached Countrywide Financial Corp., which owns Branch's subprime loan, to see if the company would reduce or waive the $18,000 prepayment penalty she is required to pay once the subprime mortgage is paid off. So far, Countrywide has been unwilling to make any concessions, he said. Countrywide had taken over Branch's loan from Redwood Financial of Redwood City, the original lender.
Seniors Reverse Mortgage plans to include the $18,000 as part of the new mortgage. The company will try to get back the $18,000 from Countrywide later.
"This loan does not require any payments, so the good thing is she will not have to come up with any money," he said. The money will come out of the home when she dies, he said.
Corbett said he suspects that in order to procure the $450,000 loan, the original agent may have misstated the Branch's stated income. No proof of income is needed for stated income, he added.
He was recently a participant at a fair-housing symposium and plans to look in to repercussions for the original broker, he said.
Corbett is starting to see the effects of subprime loans putting people out of their homes, he said. That impact is being felt disproportionately among African Americans, according to the National Association for the Advancement of Colored People (NAACP).
Branch could be a good candidate for a lawsuit recently filed by the NAACP, said mortgage broker Tom Adams, who had been helping Branch. Adams runs Commercial and Residential Real Estate and Lending in Campbell.
On July 11, NAACP sued 14 of the country's largest lenders, alleging systematic, institutionalized racism in subprime home-mortgage lending. According to the lawsuit, African-American homeowners such as Branch who received subprime mortgage loans were 30 percent more likely to be issued a higher-rate loan than Caucasian borrowers with the same qualifications.
Countrywide, the nation's largest home-mortgage lender in lending volume, told employees and mortgage brokers this week the company would no longer offer so-called 2/28 subprime loans, which carry a relatively low fixed rate the first two years then jump to a much higher floating rate, often more than 10 percent, the Wall Street Journal reported.
Adams said the vast majority of people in the mortgage industry don't engage in the kinds of practice that victimized Branch.
For information on the NAACP class-action lawsuit and to view the complaint, visit http://naacp.org/get-involved/activism/alerts/110aa-2007-7-11/index.htm.